Independent Auditor's Report Members of the Board of Education Indian Prairie Community Unit School District 204 Naperville, Illinois We have audited

Transcription

1

2

3

4

5

6

7

8

9

10

11

12

13

14 Independent Auditor's Report Members of the Board of Education Naperville, Illinois We have audited the accompanying financial statements of the governmental activities, each major fund and the aggregate remaining fund information of as of and for the year ended June 30, 2008, which collectively comprise the District s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the District's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. As described in Note 1 of the financial statements, the District adopted the provisions of Governmental Accounting Standards Board Statement No. 45, Accounting and Reporting for Postretirement Benefits Other Than Pension Benefits, and Governmental Accounting Standards Board Statement No. 50, Pension Disclosures. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund and the aggregate remaining fund information of as of June 30, 2008, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated November 13, 2008, on our consideration of the District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. McGladrey & Pullen, LLP is a member firm of RSM International an affiliation of separate and independent legal entities. 1

15 The required supplementary information which includes management s discussion and analysis (pages 3-13), pension related schedules (pages 40 41) and budgetary schedule and related note (pages 42-43) are not a required part of the basic financial statements but are supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements of the. The combining and individual fund financial statements and other schedules listed in the table of contents as supplementary data are presented for purposes of additional analysis, and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. Chicago, Illinois November 13,

16 Required Supplementary Information

17 Management s Discussion And Analysis (MD&A)

18 Management s Discussion and Analysis This section of Indian Prairie Community Unit District 204 s annual financial report presents its discussion and analysis of the District s financial performance during the fiscal year ending June 30, Please read it in conjunction with the transmittal letter found in the introductory section and the District s financial statements. Financial Highlights The District s financial status continues to be strong. Total net assets increased 10.5 percent over the course of the year. Overall revenues were $318.7 million, $14.2 million more than expenses. Enrollment continues to increase. On July 19, 2007, the District issued $55,750,000 in General Obligation School Building Bonds, Series 2007A. The proceeds of $63,345,082 (including premium of $6,968,894 and payment of issuance costs of $373,812) will be used to fund the building of the District s third high school. On September 6, 2007 the District issued $59,290,000 in General Obligation Refunding Bonds, Series 2007B to advance refund all or portions of Series 1998A, Series 1999, Series 2000, Series 2001, Series 2002, Series 2003A, and Series 2004A Bonds. On December 27, 2007, the District issued $10,910,000 in General Obligation School Refunding Bonds, Series 2007C. The proceeds of $11,266,178 (including premium of $456,906 and payment of issuance costs of $100,728) were used to pay of $11,261,220 of outstanding principal and interest on the General Obligation School Refunding Bonds, Series 1998B and generate new monies for future debt service of $4,958. Overview of the Financial Statements This annual report consists of three parts: management s discussion and analysis (this section), the basic financial statements, and required supplementary information. The basic financial statements include two kinds of statements that present different views of the District: The first two statements are government-wide financial statements that provide both short-term and long-term information about the District s overall financial status. The remaining statements are fund financial statements that focus on individual parts of the District, reporting the District s operations in more detail than the government-wide statements. The governmental funds statements tell how basic services such as regular and special education were financed in the short term as well as what remains for future spending. Fiduciary funds statements provide information about the financial relationships in which the District acts solely as a trustee or agent for the benefit of others. The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. 3

19 Management s Discussion and Analysis Figure A-1 shows how the various parts of this annual report are arranged and related to one another. Figure A-1 Organization of Indian Prairie Community Unit District 204 Annual Financial Report Management s Discussion and Analysis Basic Financial Statements Required Supplementary Information Government- Wide Financial Statements Fund Financial Statements Notes to the Financial Statements Summary Detail This report also contains other supplemental information in addition to the basic financial statements. 4

20 Management s Discussion and Analysis Figure A-2 summarizes the major features of the District s financial statements, including the portion of the District s activities they cover and the types of information they contain. The remainder of this overview section of management s discussion and analysis highlights the structure and contents of each of the statements. Figure A-2 Major Features of the Government-Wide and Fund Financial Statements Scope Required financial statements Statements of net assets. Statement of activities. Accounting basis and measurement focus Type of asset/liability information Type of inflow/outflow information Government-Wide Fund Financial Statements Statements Governmental Funds Fiduciary Funds Entire District (except fiduciary funds). Accrual accounting and economic resources focus. All assets and liabilities, both financial and capital, shortterm and long-term. All revenues and expenses during year, regardless of when cash is received or paid. The activities of the District that are not proprietary or fiduciary, such as Educational and Operations & Maintenance. Balance sheet Statement of revenues, expenditures, and changes in fund balance. Modified accrual accounting and current financial focus. Generally assets expected to be used up and liabilities that come due during the year or soon thereafter; no capital assets or long-term liabilities included. Revenues for which cash is received during or soon after the end of the year; expenditures when goods or services have been received and the related liability is due and payable. Instances in which the District administers resources on behalf of someone else, such as student activities monies. Statement of fiduciary net assets Statement of changes in fiduciary net assets Accrual accounting and economic resources focus. All assets and liabilities, both short-term and long-term; funds do not currently contain capital assets, although they can. All additions and deductions during the year, regardless of when cash is received or paid. 5

21 Management s Discussion and Analysis Government-Wide Statements The government-wide statements report information about the District as a whole using accounting methods similar to those used by private-sector companies. The statement of net assets includes all of the District s assets and liabilities. All of the current year s revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid. The two government-wide statements report the District s net assets and how they have changed. Net assets, the difference between the District s assets and liabilities, is one way to measure the District s financial health or position. Over time, increases or decreases in the District s net assets are an indicator of whether its financial position is improving or deteriorating, respectively. To assess the District s overall health, you need to consider additional non-financial factors such as changes in the District s property tax base and the condition of school buildings and other facilities. In the government-wide financial statements, the District s activities are all categorized as Governmental activities. All of the District s basic services are included here, such as regular and special education, transportation, and administration. Property taxes and state aid finance most of these activities. Fund Financial Statements School District 204 s fund financial statements provide more detailed information about the District s funds, focusing on its most significant or major funds not the District as a whole. Funds are accounting devices the District uses to keep track of specific sources of funding and spending on particular programs: Some funds are required by state law and by bond covenants. The District establishes other funds to control and manage money for particular purposes (such as repaying its longterm debts) or to show that it is properly using certain revenues (such as Working Cash). The District has two categories of funds: Governmental funds: Most of the District s basic services are included in governmental funds, which generally focus on (1) how cash and other financial assets that can readily be converted to cash flow in and out and (2) the balances left at year-end that are available for spending. Consequently, the governmental funds statements provide a detailed short-term view that helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the District s programs. Because this information does not encompass the additional long-term focus of the government-wide statements, additional information at the bottom of the governmental funds statements explains the relationship (or differences) between them. Fiduciary funds: The District is the trustee, or fiduciary, for assets that belong to others, such as the student activities funds. The District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The District excludes these activities from the government-wide financial statements because it cannot use these assets to finance its operations. 6

22 Management s Discussion and Analysis Financial Analysis of the District as a Whole Net assets. The District s combined net assets were significantly larger on June 30, 2008, than they were the year before, increasing 10.5 percent to $148.9 million. (See Figure A-3). The District s improved financial position is the product of many factors. The largest factor can be attributed to the District paying off $20.5 million in long-term debt, while investing all new debt into capital assets of the District. With a limited supply of funding, the Board of Education has had to work within the current employee configuration to modify educational programs. Figure A-3 Condensed Statement of Net Assets (in millions of dollars) Governmental Activities Assets Current assets $ $ Noncurrent assets Capital assets Total assets Liabilities Current liabilities Long-term liabilities Total liabilities Net Assets Invested in capital assets, net of related debt Unrestricted Total net assets $ $ Changes in net assets. The District s total revenues were $318.7 million (See Figure A-4.) Real estate taxes accounted for most of the District s revenue, contributing about 71 cents of every dollar raised. (See Figure A-5.) Another 22 cents came from state and federal aid for specific programs and state formula aid and the remainder from fees charged for services and miscellaneous sources. 7

23 Management s Discussion and Analysis The total cost of all programs and services was $304.5 million. The District s expenses are predominantly related to instructing, caring for (pupil services) and transporting students (75.6 percent). (See Figure A-6.) The District s administrative and business activities accounted for 10.0 percent of total costs. Total revenues surpassed expenses, increasing net assets by $14.2 million over last year. Figure A-4 Changes in Net Assets from Operating Results (in millions of Dollars Governmental Activities Percent Change Revenues Program revenues Charges for services $ 10.3 $ % Operating grants and contributions % General revenues Taxes % State aid-formula grants % Other % Total revenues $ $ % Expenses Instruction $ $ % Pupil and instructional services (13.0)% Administration and business % Transportation % Operations and maintenance % Other % Total expenses $ $ % Increase in net assets $ 14.2 $ 13.1 Net assets: Beginning Ending $ $

24 Management s Discussion and Analysis Figure A-5 - Government-Wide Revenues By Source Other 3.4% General State Aid 7.4% Charges for Services 3.2% Operating Grants and Contributions 15.0% Taxes 70.7% Figure A-6 - Government-Wide Expenses Administration and Business 10.0% Pupil and Instructional Services 8.6% Other 6.7% Instruction 62.8% Transportation 4.2% Operations and Maintenance 7.7% 9

25 Management s Discussion and Analysis Governmental Activities Revenues for the District s governmental activities were $318.7 million in Total expenses in 2008 were $304.5 million. Net assets increased $14.2 million in The good health of the District s finances can be credited to both a strong real estate tax base and budgetary controls put in place by the Board of Education. Rising real estate values led to continued strong property tax revenues in Operating grants and contributions for governmental activities continue to remain consistent with no new significant funding initiatives realized in The District did experience an increase, but the majority related on on-behalf contributions, which have offsetting expenses. General state aid increased significantly in the current year due to increase allocations from the state. Figure A-7 presents the cost of six major District activities: instruction, pupil and instructional services, administration and business, transportation, operations and maintenance, and other. The table also shows each activity s net cost (total cost less fees generated by the activities and intergovernmental aid provided for specific programs). The net cost shows the financial burden placed on the District s taxpayers by each of these functions. Figure A-7 Net Cost of Governmental Activities (in millions of dollars) Percentage Percentage Total Cost of Services Change Net Cost of Services Change Instruction $ $ % $ $ % Pupil and instructional services % % Administration and business % % Transportation % % Operations and maintenance % % Other % % $ $ $ $ The cost of all governmental activities this year was $304.5 million. Some of the cost was financed by the users of the District s programs ($10.3 million). The federal and state governments subsidized certain programs with grants and contributions of $47.7 million. Most of the District s costs, however, were financed by District taxpayers. 10

26 Management s Discussion and Analysis Financial Analysis of the District s Funds The strong financial performance of the District as a whole is reflected in its governmental funds as well. As the District completed the year, its governmental funds reported combined fund balances of $215.1 million. The General Fund experienced a current year operating surplus of $10.2 million after other financing sources. This surplus resulted in a year-end fund balance of $53.8 million. The surplus can mainly be attributed to the District s Working Cash Fund $3.0 million to the General Fund in the current year. In addition, the District received a $6.8 million increase in general state aid in the current year. The Debt Service Fund experienced a current year operating surplus of $2.2 million. This surplus can mainly be attributed to the fund receiving property tax revenue for debt service payments not due until December. The Site and Construction Fund experienced a current year operating surplus of $43.9 million. This surplus can be attributed to the District issuing $55.8 million of bonds to be used for the construction of the new high school. The District purchased the land for the new high school in the current year and building began in late fiscal year General Fund Budgetary Highlights Over the course of the year, the District did not revise the annual operating budget, which is prepared on the cash basis of accounting. While the District s budget for the General Fund anticipated that expenditures would exceed revenues by $3.5 million, before other financing sources of $3.0 million, the actual result for the year was a $2.5 million surplus before other financing sources of $3.9 million. The surplus can be attributed to the District anticipating a higher increase in regular education and special education costs in the current year over the prior year. Actual expenditures related to these items were $6.2 million under budget. 11

27 Management s Discussion and Analysis Capital Assets By the end of 2008, the District had invested $411.8 million (before accumulated depreciation of $121.6) in a broad range of capital assets, including buildings (both school and administration facilities) property and equipment (computer, audio-visual, transportation and maintenance equipment and furniture), construction in progress and land. (See Figure A-8) (More detailed information about capital assets can be found in Note 3 to the financial statements.) Depreciation expense for the year was $9.2 million, additions to land, building improvements and equipment and furniture amounted to $20.1 million. Figure A-8 Capital Assets (net of depreciation) (in millions of dollars) Total Percentage Change Land $ 33.2 $ % Land improvements (10.3)% Buildings and improvements (2.7)% Equipment % Construction in progress % TOTAL $ $ % The District s enrollment has grown steadily over the last several years reaching a present enrollment of approximately 28,500. In March 2006, the District voters authorized the construction of a third high school and to issue bond debt to build and equip the facility. The District purchased the land for the new high school in the current year and building began in late fiscal year Long Term Obligations At year-end, the District had $354.7 million in general obligation bonds and other long-term obligations outstanding as shown in Figure A-9. (More detailed information about the District s long-term liabilities is presented in Note 4 to the financial statements.) 12

28 Management s Discussion and Analysis Figure A-9 Outstanding Long-Term Obligations (in millions of dollars) Total Percentage Change General obligation bonds (financed with property taxes) $ $ % Other long-term obligations % TOTAL $ $ % The District continued to pay down its debt, retiring $20.2 million of outstanding bonds. The District issued $125.9 million in bonds to fund the construction of the District s third high school and refund existing debt. The state limits the amount of general obligation debt the District can issue to 13.8% of the assessed value of all taxable property within the District s limits. Outstanding debt is significantly below the current limit of $700.2 million. Factors Bearing on the District s Future At the time these financial statements were prepared and audited, the District was aware of the following existing circumstances that could significantly affect its financial health in the future. The Illinois General Assembly has previously imposed property tax legislation on school districts to give property taxpayers some relief by delaying tax increases each year. The legislation limits the levy increase to the lesser of the consumer price index (CPI) or five percent. This tax cap continues to limit the District s tax collection ability. New residential development within the District s boundaries will cause continued growth in student population within the District. This growth translates into expanded enrollment. The District is continually projecting enrollment, anticipating building space and staffing levels. The current weak economy, in both the nation and the state, continues to affect the District s state funding levels and timing of state receipts. The District s certified staff are under contract through the 2009 fiscal year. Requests for Information This financial report is designed to provide the District s citizens, taxpayers, and creditors with a general overview of the District s finances and to demonstrate the District s accountability for the money it receives. If you have questions about this report, or need additional financial information, contact the Business Office, Administrative Center, 780 Shoreline Drive, Aurora, Illinois

29 Basic Financial Statements

30 Government-Wide Financial Statements (GWFS)

31 Statement of Net Assets June 30, 2008 Governmental Activities Assets Current Assets Cash and investments $ 219,222,190 Receivables: Property taxes 118,868,509 Personal property replacement taxes 430,030 Other 3,794,023 Prepaids 8,980,816 Due from other government units 21,279,045 Total current assets 372,574,613 Noncurrent Assets Unamortized bond issuance costs 1,284,561 Capital assets not being depreciated 37,628,350 Capital assets being depreciated, net 252,610,080 Total noncurrent assets 291,522,991 Total assets $ 664,097,604 Liabilities and Net Assets Current Liabilities Accounts payable $ 5,227,957 Accrued liabilities 22,210,400 Accrued health claims 1,672,000 Deferred revenue 112,696,823 General obligation bonds 20,170,000 Capital lease 297,717 Total current liabilities 162,274,897 Unamortized premium on bonds 16,909,279 Unamortized discount on bonds (134,575) Deferred loss on refunding (1,000,163) General obligation bonds 333,745,000 Capital lease 535,135 Other post employment benefits 2,882,240 Total long-term liabilities 352,936,916 Total liabilities 515,211,813 Net Assets Invested in capital assets, net of related debt 43,622,151 Unrestricted 105,263,640 Total net assets 148,885,791 Total liabilities and net assets $ 664,097,604 See Notes to Basic Financial Statements. 14

32 Statement of Activities Year Ended June 30, 2008 Net (Expense) Revenue and Changes in Program Revenue Net Assets Operating Charges for Grants and Governmental Functions/Programs Expenses Services Contributions Activities Governmental activities: Instruction: Regular programs $ 138,057,126 $ 3,531,481 $ 14,991,279 $ (119,534,366) Special programs 44,967,733-20,297,225 (24,670,508) Other instructional programs 7,829,428-2,614,488 (5,214,940) Support services: Pupils 15,229, (15,229,153) Instructional staff 10,995,616-2,318,905 (8,676,711) General administration 2,449, (2,449,578) School administration 15,979, (15,979,714) Business 12,136,703 6,061, ,919 (5,740,984) Transportation 12,815,064-7,151,295 (5,663,769) Operations and maintenance 23,512, ,764 - (22,797,958) Central 5,028, (5,028,429) Other support services 15, (15,554) Community services 239, (239,358) Payments to other governments 401, (401,623) Interest and charges 14,828, (14,828,325) Total governmental activities 304,486,126 10,308,045 47,707,111 (246,470,970) General revenues: Taxes: Property taxes, general purposes 195,262,675 Property taxes, debt service 27,166,501 Corporate property replacement taxes 2,850,357 State aid-formula grants 23,623,317 Grants and contributions not restricted to specific programs 255,387 Investment earnings 10,515,927 Miscellaneous 1,021,457 Total general revenues 260,695,621 Change in net assets 14,224,651 Net assets: July 1, ,661,140 June 30, 2008 $ 148,885,791 See Notes to Basic Financial Statements. 15

33 Fund Financial Statements (FFS)

34 Balance Sheet Governmental Funds June 30, 2008 Assets Major Funds Site and Nonmajor Total General Debt Service Construction Governmental Governmental Fund Fund Fund Funds Funds Cash and investments $ 62,456,207 $ 17,246,808 $ 107,103,180 $ 32,415,995 $ 219,222,190 Receivables: Property taxes 98,708,749 14,418,726-5,741, ,868,509 Corporate property replacement taxes 430, ,030 Other 1,042, ,135 1,916, ,187 3,794,023 Prepaids 8,980, ,980,816 Due from other governmental units 12,837, ,441,368 21,279,045 Total assets $ 184,456,437 $ 31,932,669 $ 109,019,923 $ 47,165,584 $ 372,574,613 Liabilities and Fund Balances Liabilities Accounts payable $ 4,330,613 $ - $ 888,350 $ 8,994 $ 5,227,957 Accrued liabilities 22,210, ,210,400 Accrued health claims 1,228, ,228,000 Deferred revenues 102,891,063 13,670,102-12,236, ,798,123 Total liabilities 130,660,076 13,670, ,350 12,245, ,464,480 Fund balances, Reserved for: Prepaids 8,980, ,980,816 Debt service - 18,262, ,262,567 Unreserved, reported in: General fund 44,815, ,815,545 Special revenue funds ,919,632 34,919,632 Capital project funds ,131, ,131,573 Total fund balances 53,796,361 18,262, ,131,573 34,919, ,110,133 Total liabilities and fund balances $ 184,456,437 $ 31,932,669 $ 109,019,923 $ 47,165,584 $ 372,574,613 See Notes to Basic Financial Statements. 16

35 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets June 30, 2008 Total fund balances - governmental funds $ 215,110,133 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not current financial resources and therefore are not reported in the funds. 290,238,430 State grant revenues that are deferred in the fund financial statements because they are not available are recognized as revenue in the government-wide financial statements. 16,101,300 Premiums on bonds that are other financing sources in the fund financial statements are liabilities that are amortized over the life of the bonds in the government-wide financial statements. (16,909,279) Discounts on bonds that are other financing uses in the fund financial statements are assets that are amortized over the life of the bonds in the government-wide financial statements. 134,575 Bond issuance costs that are an expenditure in the fund financial statements are an asset that is amortized over the life of the bonds in the government-wide financial statements. 1,284,561 Losses on refunded debt that are other financing uses in the fund financial statements are assets that are amortized over the life of the bonds in the government-wide financial statements. 1,000,163 Some liabilities reported in the statement of net assets do not require the use of current financial resources and, therefore, are not reported as liabilities in governmental funds: General obligation bonds (353,915,000) Capital lease (832,852) Other post employment benefits (2,882,240) Accrued health claims (444,000) Net assets of governmental activities $ 148,885,791 See Notes to Basic Financial Statements. 17

36 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds Year Ended June 30, 2008 Major Funds Site and Nonmajor Total General Debt Service Construction Governmental Governmental Fund Fund Fund Funds Funds Revenues: Property taxes $ 184,109,959 $ 27,166,501 $ - $ 11,152,716 $ 222,429,176 Corporate property replacement taxes 2,550, ,000 2,850,357 Charges for services 11,088, ,113-11,329,502 Unrestricted state aid 23,623, ,623,317 Restricted state aid 33,649, ,682,295 40,331,332 Restricted federal aid 6,628, ,628,373 Interest 2,796, ,501 4,622,924 2,100,526 10,515,927 Total revenues 264,446,408 28,162,002 4,864,037 20,235, ,707,984 Expenditures: Current: Instruction: Regular programs 129,937, ,409, ,346,493 Special programs 40,230, ,005,131 42,235,135 Other instructional programs 7,718, ,298 7,829,428 Support services: Pupils 14,857, ,952 15,229,153 Instructional staff 7,257, ,022 7,369,406 General administration 2,337, ,614 2,449,578 School administration 12,071, ,920 12,931,474 Business 8,671,003-3,285, ,624 12,139,825 Transportation ,815,064 12,815,064 Operations and maintenance 20,288, ,557 20,308,796 Central 4,571, ,479 4,922,210 Other support services 15, ,554 Community services 238, ,358 Payments to other governments 401, ,623 Capital outlay 9,241,828-20,070,564-29,312,392 Debt service: Principal 318,816 20,200, ,518,816 Interest and charges 16,392 17,027, ,044,006 Bond issuance cost - 430, , ,207 Total expenditures 258,173,024 37,658,009 23,729,574 18,351, ,912,518 Excess (deficiency) of revenues over (under) expenditures 6,273,384 (9,496,007) (18,865,537) 1,883,626 (20,204,534) Other financing sources (uses): Bond proceeds - 70,200,000 55,750, ,950,000 Premium on bonds - 456,906 6,968,894-7,425,800 Discount on bonds - (140,637) - - (140,637) Payment to escrow agent - (58,819,696) - - (58,819,696) Lease proceeds 889, ,397 Transfer in 3,000, ,000,000 Transfer (out) (3,000,000) (3,000,000) Total other financing sources (uses) 3,889,397 11,696,573 62,718,894 (3,000,000) 75,304,864 Net change in fund balances 10,162,781 2,200,566 43,853,357 (1,116,374) 55,100,330 Fund balances: July 1, ,633,580 16,062,001 64,278,216 36,036, ,009,803 June 30, 2008 $ 53,796,361 $ 18,262,567 $ 108,131,573 $ 34,919,632 $ 215,110,133 See Notes to Basic Financial Statements. 18

37 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities Year Ended June 30, 2008 Net change in fund balances total governmental funds $ 55,100,330 Amounts reported for governmental activities in the statement of activities are different because: State grant revenues that are deferred in the fund financial statements because they are not available are recognized as revenue in the government-wide financial statements. Prior year deferred balance $ (15,098,507) Current year deferred balance 16,101,300 1,002,793 Governmental funds report capital outlays as expenditures paid while governmental activities report depreciation expense to allocate those expenditures over the lives of the assets. This is the amount by which capital outlays exceeded depreciation expense in the current period. Capital outlays 22,166,561 Depreciation expense (9,230,633) 12,935,928 In governmental funds, long-term debt is considered other financing sources, but in the statement of net assets, debt is reported as a liability. In the current period, proceeds were received from: General obligation bonds (125,950,000) Capital lease (889,397) Repayment of principal on long-term debt is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net assets. Bond principal retirement 20,200,000 Bond principal refunded 57,765,000 Capital lease principal retirement 318,816 Premium on bonds is recorded as other financing sources in the fund financial statements, but the premium is recorded as a liability in the Statement of Net Assets and is amortized over the life of the bonds. These are the amounts in the current period. Premium on bonds (7,425,800) Amortization premium on bonds 2,499,067 (4,926,733) Discount on bonds is recorded as other financing uses in the fund financial statements, but the discount is recorded as an asset in the Statement of Net Assets and is amortized over the life of the bonds. These are the amounts in the current period. Discount on bonds 140,637 Amortization discount on bonds (6,062) 134,575 Bond issuance costs are recorded as an expenditure in the fund financial statements, but the cost is recorded as an asset in the Statement of Net Assets and is amortized over the life of the bonds. These are the amounts in the current period. Bond issuance costs 804,207 Amortization bond issuance costs (222,791) 581,416 Losses on refunded debt are recorded as an other financing use in the fund financial statements, but the loss is recorded as an asset in the Statement of Net Assets and is amortized over the life of the bonds. These are the amounts in the current period. Deferred loss on refunding 1,054,696 Amortization deferred loss on refunding (54,533) 1,000,163 Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. This activity consists of: Increase in other post employment benefits (2,882,240) Increase in accrued health claims. (166,000) (3,048,240) Change in net assets of governmental activities $ 14,224,651 See Notes to Basic Financial Statements. 19

38 Statement of Fiduciary Assets and Liabilities Agency Fund June 30, 2008 Agency Student Activity Fund Assets, cash $ 1,987,618 Liabilities, due to activity fund organizations 1,987,618 Total net assets $ - See Notes to Basic Financial Statements. 20

39 Notes to Basic Financial Statements Note 1. Summary of Significant Accounting Policies Nature of Activities operates as a public school system governed by its Board of Education. The District is organized under The School Code of the State of Illinois, as amended. The District serves the communities of Naperville, Aurora, and small portions of Bolingbrook and Warrenville. The accounting policies of the District conform to accounting principles generally accepted in the United States of America as applicable to governments. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The following is a summary of the more significant accounting policies: Financial Reporting Entity As defined by generally accepted accounting principles established by the Governmental Accounting Standards Board (GASB), the financial reporting entity consists of the primary government, as well as component units, which are legally separate organizations for which elected officials of the primary government are financially accountable. Financial accountability is defined as: (1) Appointment of a voting majority of the component unit s board, and either a) the ability to impose will by the primary government, or b) the possibility that the component unit will provide a financial benefit to or impose a financial burden on the primary government; or (2) Fiscal dependency on the primary government. Based upon the application criteria, no component units have been included within the reporting entity. Government-Wide and Fund Financial Statements Government-Wide Financial Statements: The government-wide Statement of Net Assets and Statement of Activities report the overall financial activity of the District. Eliminations have been made to minimize the double counting of internal activities of the District. The financial activities of the District consist of governmental activities, which are primarily supported by taxes and intergovernmental revenues. The Statement of Net Assets presents the District s non-fiduciary assets and liabilities with the difference reported in three categories: Invested in capital assets, net of related debt consists of capital assets, net of accumulated depreciation and reduced by outstanding balances for bonds and other debt that are attributable to the acquisition, construction, or improvement of those assets. Restricted net assets result when constraints placed on net asset use are either externally imposed by creditors, grantors, contributors, and the like, or imposed by law through constitutional provisions or enabling legislation. The District had no restricted net assets at June 30, Unrestricted net assets consist of net assets that do not meet the criteria of the two preceding categories. 21

40 Notes to Basic Financial Statements Note 1. Summary of Significant Accounting Policies (continued) Government-Wide and Fund Financial Statements (continued) When both restricted and unrestricted resources are available for use, it is the District s policy to use restricted resources first to finance qualifying activities, then unrestricted resources as they are needed. The Statement of Activities demonstrates the degree to which the direct expenses of a given function (i.e., instruction, support services, etc.) are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function. Program revenues include (a) charges paid by the recipients of goods or services offered by the programs (including fines and fees), and (b) grants and contributions that are restricted to meeting the operational requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fiduciary funds are excluded from the government-wide financial statements. Fund Financial Statements: Separate financial statements are provided for governmental funds and fiduciary (agency) funds, even though the latter are excluded from the government-wide financial statements. The fund financial statements provide information about the District s funds. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. The District has the following major governmental funds- General Fund, Debt Service Fund, and Site and Construction Fund. All remaining governmental special revenue funds are aggregated and reported as nonmajor governmental funds. The District administers the following major governmental funds: General Fund This is the District s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. Debt Service Fund Accounts for the resources accumulated and payments made for principal and interest on long-term general obligation debt of governmental funds. Site and Construction Fund Accounts for the acquisition, construction, renovation and additions of major capital facilities. Additionally, the District administers an agency fund that is used to account for assets held by the District in an agency capacity. These funds are held on behalf of the students of the District. Measurement Focus and Basis of Accounting and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flow takes place. Nonexchange transactions, in which the District gives (or receives) value without directly receiving (or giving) equal value in exchange, include various taxes, stateshared revenues and various state, federal and local grants. On an accrual basis, revenues from taxes are recognized when the District has a legal claim to the resources. Grants, entitlements, state-shared revenues and similar items are recognized in the fiscal year in which all eligibility requirements imposed by the provider have been met. 22

41 Notes to Basic Financial Statements Note 1. Summary of Significant Accounting Policies (continued) Measurement Focus and Basis of Accounting and Financial Statement Presentation (continued) Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the District considers revenues to be available if they are collected within 60 days of the end of the current fiscal year. Significant revenue sources which are susceptible to accrual include property taxes, other taxes, grants, and interest. All other revenue sources are considered to be measurable and available only when cash is received. Expenditures generally are recorded when the liability is incurred, as under accrual accounting. General capital asset acquisitions are reported as expenditures in governmental funds. Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in the government-wide financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Property taxes Property taxes receivable represent the 2007 property tax levy and were recognized as a receivable at the time they were levied. The 2007 tax levy was passed by the Board of Education on December 10, 2007, and attached as an enforceable lien on the property as of the preceding January 1. The taxes become due and collectible in March and September 2008, and are collected by the county collector, who in turn remits to the District its respective share. For all funds and on a government-wide basis, the District recognizes collections within 60 days after year-end as revenue in the current fiscal year with the remaining portion of the levy to be recognized in the following fiscal year. Accordingly, the second half amount is reflected as deferred revenue in the current year. This methodology conforms to the measurable and available criteria for revenue recognition. Assets, Liabilities, and Net Assets or Equity Investments Investments are stated at fair value based on quoted market prices for same or similar investments. Interfund Receivables, Payables, and Activity Loans amounts provided with a requirement for repayment. Interfund loans are reported as due from other funds in lender funds and due to other funds in borrower funds for short-term borrowings and advances to other funds in lender funds and advances from other funds in borrower funds for long-term borrowings. Amounts are eliminated in the government-wide statement of net assets. Transfers flows of assets (such as cash or goods) without equivalent flows of assets in return and without a requirement for repayment. In governmental funds, transfers are reported as other financing uses in the funds making transfers and as other financing sources in the funds receiving transfers. 23

42 Notes to Basic Financial Statements Note 1. Summary of Significant Accounting Policies (continued) Assets, Liabilities, and Net Assets or Equity (continued) Capital Assets Capital assets which include land, construction in progress, land improvements, buildings and improvements, and equipment, are reported in the Statement of Net Assets. Capital assets are defined as assets with an initial individual cost of more than $5,000, and an estimated useful life of greater than three years. Additions or improvements that significantly extend the useful life of an asset, or that significantly increase the capacity of an asset are capitalized. Expenditures for asset acquisitions and improvements are stated as capital outlay expenditures in the governmental funds. These assets have been valued at historical cost or estimated historical cost if purchased or constructed. Donated assets are recorded at their estimated fair market value at the date of donation. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend the assets lives are not capitalized. Depreciation of capital assets is recorded in the Statement of Activities with accumulated depreciation reflected in the Statement of Net Assets and is provided on the straight-line basis over the following estimated useful lives: Buildings and improvements Equipment Land improvements 50 years 5 10 years 20 years Compensated Absences Certified employees working less than 12 months a year do not earn vacation days; however noncertified, full-time employees earn vacation days after completing a full year of service. Noncertified employees are not allowed to carryforward vacation days to the next fiscal year. All full-time employees receive 12 sick days and 3 personal days per year which convert to sick days if unused per year and these days may accumulate to a maximum of 260 days. These accumulated sick days do not vest. Unearned/Deferred Revenue The District defers revenue recognition in connection with resources that have been received, but not yet earned. Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. 24

43 Notes to Basic Financial Statements Note 1. Summary of Significant Accounting Policies (continued) Assets, Liabilities, and Net Assets or Equity (continued) Long-Term Obligations In the government-wide financial statements, long-term debt and other long-term obligations, including compensated absences, are reported as liabilities in the Statement of Net Assets. Items such as premiums, discounts, bond issuance costs and gains or losses on bond sales are capitalized and amortized over the life of the related debt. In the fund financial statements, the face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Restricted Net Assets For the government-wide statement of net assets, net assets are reported as restricted when constraints placed on net asset use are either: Externally imposed by creditors (such as debt covenants), grantors, contributors, or laws or regulations of other governments; Imposed by law through constitutional provisions or enabling legislation. When both restricted and unrestricted resources are available for use, it is the District s policy to use restricted resources first, then unrestricted resources as they are needed. Eliminations and Reclassifications In the process of aggregating data for the government-wide Statement of Activities, some amounts reported as interfund activity and interfund balances in the funds were eliminated or reclassified. Use of Estimates The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those estimates. New Accounting Pronouncements The District adopted GASB Statement No. 45 Accounting and Financial Reporting by Employers for Postretirement Benefits Other Than Pensions, as of June 30, 2008 on a prospective basis. The District adopted GASB Statement No. 50 Pension Disclosures an amendment to GASB Statements No. 25 and No. 27, as of June 30,